OpenStax-CNX module: m35346

Business models and marketing:

Consumer marketing models

Global Text Project

This work is produced by OpenStax-CNX and licensed under the
Creative Commons Attribution License 3.0

Abstract

Business Fundamentals was developed by the Global Text Project, which is working to create opencontent electronic textbooks that are freely available on the website http://globaltext.terry.uga.edu.
Distribution is also possible via paper, CD, DVD, and via this collaboration, through Connexions. The
goal is to make textbooks available to the many who cannot aord them. For more information on getting
involved with the Global Text Project or Connexions email us at drexel@uga.edu and dcwill@cnx.org.
Editors: Salvador Trevio and Carlos Ruy Martinez (ITESM, Monterrey Campus, Mexico)
Contributors: Carlos Alberto Alanis, Gaspar Rivera, Jorge Echeagaray, Jose de Jesus Montes,
Juana Monica Garcia, Ramiro Robles, and Roberto Sanchez
The formal use of marketing concepts is a fairly recent activity in developing economies. In the past,
most companies focused on producing products or oering services without much emphasis on customers
and wants. Understanding consumer behavior was not considered to be important. The emphasis was on
the product or service per se. Given the emergence of a global economy, however, which brought the opening
of markets and increased competition, the traditional approach has changed dramatically. Companies are
increasingly focusing on what customers need and/or want. Market-oriented companies are beginning to
emerge in every developing economy in the world.
The purpose of this section is to introduce you to the importance of marketing oriented companies in
developing economies, as well as identifying business models which follow a marketing model rather than
a product model.

1 The product model vs the marketing model

According to Philip Kotler, the product model is a management orientation that assumes that if a quality
product is produced, and oered to consumers at a price they nd to be acceptable, the company will
be successful in the market place. Another author who successfully introduced a marketing orientation is
Theodore Levitt. His orientation is sometimes referred as a marketing myopia approach since companies
dene their business in terms of products and not in terms of customer needs and wants. For example, a car
manufacturer may think they are in the car business while they are, in fact, competing in the transportation
industry.
Under the product model, management focuses on developing high quality products which can be sold at
the right price, but with insucient attention to what it is that customers really need and want. For example,
Apple determined that what customers wanted was the ability to purchase music one song at a time rather
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OpenStax-CNX module: m35346

than purchase an entire CD with 16 tracks, only three of which were really wanted. They subsequently
developed and introduced the iPod and iTunes online store which revolutionized the way consumers buy
music. In the meantime, traditional producers of traditional CDs lost market share to Apple, which had a
much better understanding of how to satisfy consumers.
The premises implicit in the product model are:

Consumers buy products more than solutions.

Consumers are interested basically in product quality.
Consumers recognize product quality and dierences in performance alternative products.
Consumers choose between dierent products based on getting the best quality for the money.
The main task of organization is to keep improving quality and reducing cost as key factors to maintain
and attract customers.

The product model used to be applied in developing or closed economies where few, if any choices were
available. Advantages of the product model are that the cost of determining consumer preferences and the
development of new products and services are minimized or eliminated because consumers are in some way
captive. By way of example, compare the automobile industry in developed countries to the automobile
industry in the Soviet Bloc countries prior to 1989. Customers had a wide variety of automobile models to
choose from while citizens in the Eastern Bloc had few. The latter was operating on a product model rather
than a marketing model. Disadvantages of the product model are that as soon as a company could oer a
product more oriented to satisfy customers
needs and desires the companies oriented to products will lose
the most if not all of its market share. The traditional CD companies referred to above are a good example
of this.
In summary, market orientation is essentially a customer orientation. Understanding customer needs lies
at the core of the marketing concept.

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